Leasehold Reform (Ground Rent) Bill [HL]

(Limited Text - Ministerial Extracts only)

Consideration of Commons amendments
Monday 7th February 2022 Lords Chamber

Moved by

[Lord Greenhalgh]

That the House do agree with the Commons in their Amendments 1 to 5.

1: Clause 1, page 1, line 9, at end insert—
“(but see subsection (5)).”

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5: Clause 6, page 5, line 7, after first “of” insert “premises which consist of, or include,”

[The Minister of State, Home Office and Department for Levelling Up, Housing & Communities (Lord Greenhalgh) (Con)]

My Lords, before I turn to the Commons amendments, I will take a moment to remind us all of what the Leasehold Reform (Ground Rent) Bill will do. The Bill will put an end to ground rents for most new residential leasehold properties as part of the most significant changes to property law in a generation. The Bill’s provisions will lead to fairer, more transparent homeownership for thousands of future leaseholders.

Throughout the Bill’s passage, there have been helpful discussions with Members of both Houses and with key stakeholders in the industry and from consumer groups. This has been crucial and has led to a number of refinements being made to this Bill during its stages in the other place. At our last opportunity to debate this Bill, in September 2021, changes were suggested by noble Lords to help improve it. I undertook to ensure that these would be made; and as promised, this was done. I hope that noble Lords will agree that the Bill returns to this Chamber in an even stronger position than when it left. We meet today to consider these amendments as made in the other place, and I beg to move that the House do agree with the Commons in its Amendments 1 to 9.

Commons Amendments 1 and 2 relate to the process known as a “deemed surrender and regrant.” Taken together, these amendments mean that a lease can have a peppercorn rent after it has been regranted, even where no new premium is paid. Especially for the noble and learned Lord, Lord Etherton, I can confirm the provisions in the amended Clause 6, Amendments 1 to 5, are amended also to apply in the case of a deemed surrender and regrant by operation of law where there is an extension of the term of a pre-commencement lease or the addition of further property. Commons Amendments 3, 4 and 5 are also connected to the “deemed surrender and regrant” process. But more specifically, they clarify the matter raised by the noble and learned Lord, Lord Etherton with regard to a lease variation.

As noble Lords may remember, it was pointed out very diligently that the legislation as drafted was perhaps not as clear as it could be in relation to permitted rent within leases where they replace a pre-commencement lease. The noble and learned Lord, Lord Etherton raised his concern that it was unclear whether the Bill as then drafted would require that any existing ground rent in such leases would be reduced to a peppercorn. I thank the noble and learned Lord for bringing this to my attention. I can confirm that the amendments made in the other place make it clear that, where the property demised is changed, the resulting surrender and regrant will not reduce the ground rent on the remaining term of a pre-commencement lease to a peppercorn. Any extension to the term of the pre-commencement lease will be required to be a peppercorn. Crucially, this amendment ensures that freeholders need not withhold consent for a lease variation unnecessarily. I hope noble Lords will agree this is a positive development.

I turn to Commons Amendment 6. Noble Lords will remember that on Report an amendment was passed that inserted a new clause into the Bill, the “duty to inform”. It placed a statutory duty on landlords to inform an existing leaseholder of the changes introduced by the Act ahead of commencement and linked this duty to the Bill’s enforcement penalty regime, should a landlord fail to comply. Of course, we recognise the importance of leaseholders being aware of their rights and that they are therefore not rushed into lease extensions before this Bill takes effect. I thank the noble Baroness, Lady Grender, who is not in her place, and the noble Lord, Lord Stunell, for raising the important matter of consumer awareness, which the Government take seriously.

I support the principles behind the original Lords amendment. It is vital that there is transparency in the leasehold system. However, the Government continue to have doubts as to whether placing a duty to inform in the Bill would be the most effective and expedient means of meeting the objective that noble Lords set out to achieve. We remain of the view that this can be accomplished without the need for further primary legislation. The reasons for leaving out the duty to inform include legal and practical considerations that I hope noble Lords will allow me to explain a little.

As drafted, the duty to inform, although well intentioned, is unworkable. The original amendment placed a duty on all landlords, even if they were not residential, and did not specify how each landlord may satisfy their legal duties contained within the clause. Including the clause would require the penalty enforcement process for the duty to inform to align with the rest of the Bill; for instance, the duty to inform clause provided no mechanism for landlords to appeal and did not offer a concrete explanation of the means for enforcement, such as notices and requests for written representations. To make this clause workable would take up further parliamentary time and cause delay to the implementation of the new peppercorn rents that we all want to see. Furthermore, in terms of practicality, the clause related only to the short period between Royal Assent and the peppercorn limit coming into effect. It would therefore place a quite significant burden on enforcement authorities if it was included in the Bill.

Again, I thank both the Labour Front Bench and the Liberal Democrats’ spokesperson, the noble Lord, Lord Stunell, for their recent engagement on this matter. As I have said before, they can rest assured that I agree with them on the principle behind the amendment. We all understand how important it is to ensure that these changes to leasehold law are publicised for the good of leaseholders. However, I appreciate that noble Lords may want a little more. We have looked very closely at how to achieve the objectives that informed the original new clause, so I wanted to share some of the detail on measures that we will take ahead of commencement to close the gap.

We are developing a suite of communications activities, from social media to encouraging the broader press to cover these changes. We will work closely with our partners such as LEASE, the body that provides free and independent advice to leaseholders, as well as National Trading Standards and, of course, our industry partners, to do what we can to raise awareness of the coming changes. We will also contact our friends in the Leasehold Knowledge Partnership. Everyone who can help to communicate should be brought on board. We are also preparing updates to existing government guidance for consumers and will publish new detailed guidance for enforcement officers in England. We expect Wales to produce separate guidance, which should mirror any guidance that we publish for England, and we will work closely with Welsh colleagues to ensure that we get this right.

After Royal Assent, we will write to solicitors, legal executives, licensed conveyancers and relevant professional bodies, detailing the new peppercorn restrictions. We should also contact those who represent property agents and managing agents—ARMA—as I mentioned in our discussions. Nigel Glen has a tremendous database, as does the Institute of Residential Property Management, where Andrew Bulmer can also help communicate the message.

I hope that this is reassuring to noble Lords who have raised concerns about the importance of accurate, independent legal advice to leaseholders. More generally, as part of the enforcement of the Bill, National Trading Standards will assist with advising local enforcement authorities. The department will fund National Trading Standards’ implementation costs from our budgets. We are in discussions with the Local Government Association on this. As I have stated previously, I am open to working with anyone across the House on any further activities that they believe we should pursue.

I hope noble Lords are sufficiently reassured that the Government are serious about raising awareness of the Bill among consumers ahead of it coming into force and can agree that the suite of actions we are taking represent the best course of action. On this basis, I ask that your Lordships agree to Commons Amendment 6.

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Moved by

[Lord Greenhalgh]

That the House do agree with the Commons in their Amendment 6.

6: Clause 8, leave out Clause 8

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[Baroness Hayman of Ullock (Lab)]

My Lords, I have not previously spoken in the debates on this Bill, but I will be brief. I start by thanking noble Lords who have done a lot of work to improve this much-needed legislation. The amendment in the name of the noble Lord, Lord Stunell, is a welcome reminder that the Bill lacks any obligation for landlords to alert leaseholders in advance of changes relating to ground rents and leasehold extensions. We fully support the noble Lord’s amendment, which seems to be an entirely proportionate measure and in no way presents an obstacle to the core provisions of the Bill.

The Government have been unable to bring forward any safeguards to address this specific power imbalance at the expense of leaseholders. Without it, we believe that the legislation remains flawed. The relationship between leaseholders and landlords should be defined by the principle of transparency and accountability—as, in fact, the Minister agreed in his opening remarks—but this is simply not possible without provisions such as these. So I ask the Minister, even at this late stage, to provide further assurances that have not previously been forthcoming to allay the concerns from across the House.

[Lord Greenhalgh (Con)]

My Lords, I am not sure whether we have moved all the amendments up to Amendment 9—because then I can wind up, so to speak. I can appreciate the—

[The Deputy Speaker (Lord Geddes) (Con)]

If I may interrupt the noble Lord for a moment—we have moved only Amendments 1 to 5. We are now discussing Amendment 6, and we will then come to Amendments 7, 8 and 9.

[Lord Greenhalgh (Con)]

Okay. I am just getting used to this process. On Amendment 6, it is really helpful that the noble Lord, Lord Stunell, raised the issue of timing. Of course, in order to start the gun, if you like, we need Royal Assent, and then there needs to be a commitment around commencement, which means having all the regulations in place. So let us get this Bill on the statute book as quickly as possible. I have already made a commitment—which perhaps goes beyond where I should have gone because I am, perhaps, a little naive—that, within six months of Royal Assent, we will have commencement. So we know what the window is, effectively, because I made that commitment at the Dispatch Box and I do not want to let anyone down. That is the timeframe: let us get Royal Assent and then, within six months, we will have commencement—and that is the period of time we should be concerned about.

We have very genuinely tried to respond to the issues that have been raised to ensure that the greatest number of people are aware of the dangers and the risks of carrying out a lease extension in that window in a way that would be detrimental to their interests. That is why we have that suite of communications measures. I hope, therefore, that with that and a better understanding of the timeframe, the noble Lord, Lord Stunell, will withdraw his amendment.

On the timing, I have now been in post and responsible for leasehold reform for nearly two years—I have survived one reshuffle—and it is fair to say that both Secretaries of State, particularly the right honourable gentleman in the other place, are absolutely committed to the second wave of leasehold reform, which will be far harder than this modest ground rents Bill. I cannot give a commitment about what will appear, but my expectations are that leasehold reform will be front and centre around his ambition for a wider reform of housing.

[The Deputy Speaker (Baroness Barker) (LD)]

My Lords, the Motion is that this House do agree with the Commons in their Amendment 6. As many as are of that opinion will say “Content”. Lord Stunell?

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Moved by

[Lord Greenhalgh]

That the House do agree with the Commons in their Amendments 7 to 9.

7: Clause 23, page 14, line 13, leave out “consideration in money or money’s worth” and insert “pecuniary consideration”

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[Lord Greenhalgh (Con)]

My Lords, I have a few words in conclusion to thank everybody who has worked so hard to get the Bill to this stage. I thank particularly the noble and learned Lord, Lord Etherton, who has been helpful in tidying up this Bill, the noble Earl, Lord Lytton, with his knowledge as a professional surveyor, and my noble friends Lord Young of Cookham and Lord Hammond of Runnymede, who have been extremely insightful.

I probably should put on record, because I forgot to do so until the very last moment, my residential and commercial interests. I want to make sure that I have declared them, although they are properly set out in my declaration of interests.

I also thank the Benches opposite. I have had to deal with changes and am sorry to have lost the noble Lord, Lord Kennedy, who I believe has gone off to be Chief Whip. Then Labour sent the noble Baroness, Lady Blake of Leeds, from Yorkshire. and now we have the noble Baroness, Lady Hayman of Ullock, who has an incredible reputation in the other place for being fair-minded and constructive. It is marvellous to work with her.

It has been great to work with the Liberal Democrats as well. I will even thank the noble Baroness, Lady Pinnock; she described herself as a Yorkshire terrier, which is why my ankles seem to get bitten quite a bit when she intervenes; she does so on behalf of the interests of leaseholders and fighting their corner, which is appreciated.

The noble Baroness, Lady Grender, who is not in her place, raised the issue of the gap in the first place. I know the noble Lord, Lord Stunell, is representing her, but she raised an important matter, and it is to her credit that the Government have responded to those genuine concerns. I thank everybody—the Opposition Benches, the Liberal Democrats and the Cross Benches—for a very constructive approach to the Bill.

No Minister should ever leave the Dispatch Box without thanking the officials, many of whom are in the Box and have been simply tremendous in supporting me. We should all be proud of what this House is putting forward in legislation, which is much improved because of the contributions of noble Lords. I commend the Bill to the House.